Keshavlal Hiralal vs Girdharlal Uttamram Parekh

Scott, Kt., C.J.—The only point that we have to dispose of in this appeal is whether the claim of the appellants for rent accrued due under the lease under which the Company enjoyed the property upon which the mill-buildings were erected before the date of the winding-up could be satisfied out of the proceeds of the mill-buildings in priority to the claims of unsecured creditors. The lease of which the Company have taken the benefit provided that:�" If the lessees cause delay in paying the rent the landlords should give one month''s notice, and in-spite of that if the lessees or their representatives do not pay the arrears of rent within one month the landlords may recover the arrears of rent with interest at the rate of eight annas per cent, per month from the building or buildings which may have been erected on the land and from the person and property of tie tenants. " No question has been raised as to the want of notice under that clause, but what we have to consider is whether the clause gives a charge to the landlords for unpaid rent upon the buildings when the buildings come into existence. We think that in equity a charge was created upon the buildings when they came into existence, as is shown by the judgment in Holroyd v. Marshall (1). But the charge does not amount to a transfer or a mortgage, and the further question arises whether in equity such a charge will give a right of priority to the landlords in a winding-up. That it will do so seems to be taken as settled law in the judgment of Mr. Justice Lindley in Andrea v. Swansea Cambrian Benefit Building Society (2), where he says that a general charge upon the assets of the Company although not amounting to a mortgage will give the holder of the charge priority over the unsecured creditors. We must, therefore, allow the appeal, directing the liquidator to pay out of the proceeds of the buildings upon the land the sum of Rs. 1937-8-0 with interest at 6 per cent, in priority to the unsecured creditors. The appellants are entitled to their costs out of the assets of the Company in both Courts.